Last week, the European Union Council agreed on a set of policies for tackling the euro crisis. It was hoped that the new agreement (hereafter referred to as the October Agreement) would be a decisive step toward resolving a slow burning crisis that threatened to derail the euro, plunge the EU itself into a process of explicit disintegration and, consequently, drag into a new recession the global economy.

Readers of these pages will know that I have taken the view that the October Agreement was made of the wrong stuff (click here, here and here). Others (including President Obama) have praised Europe for moving in the right direction, reserving their doubts and criticism for Europe’s pace along this, ‘righteous’, path. I beg to differ. The October Agreement was catastrophically bad in terms of the direction that it is taking Europe, not just due to its anaemic pace. (In my next posting I plan to sum up all the reasons for which the October Agreement is even worse for Europe than it is for Greece.) If I am right, it was the duty of our political leaders to say NO to it in Brussels last week. Each one of them, Mr Papandreou included, had the opportunity to withhold their signature then, thus causing the EU leadership to keep brainstorming until a decent, workable solution was found; one that would genuinely resolve the euro’s systemic crisis.

The Greek PM did not utilise his prerogative to say No to the October Agreement within the Council. Indeed, he returned to Greece eulogising it and calling upon the Greek people to embrace both the Agreement and his government, demanding brownie points for a difficult job well done. Soon after, however, he discovered that the public was hostile and his own MPs reluctant to afford him another lease of political life. With a wafer thin majority in Parliament, he faced two options: resignation or a fresh election. So, he opted for the… third option: A referendum on the October Agreement to be called for after the latter’s details have been finalised.

What was the logic for such a referendum? The Greek PM said that turning to the people signals a fundamental respect for democracy and a determination for turning the people into active participants in the shaping of Greece’s future. Such lofty idealism would be wonderful in itself. Indeed, I too think that referenda ought to be part of every well-functioning democracy. Alas, this referendum is as far from such ideals as a political ploy can be. What really happened was that, upon his return from Brussels (where, I repeat, he co-singed the October Agreement), he realised that his MPs were unimpressed. Nursing a wafer thin majority in Parliament (a majority of 3, which he himself has conceded is insufficient during these turbulent times), he decided that some pro-active move was necessary to give his government a new lease of life. Back in June he tried to lure the opposition into government. It backfired then and it would backfire again. The obvious alternative would be to call for a snap election. However, Papandreou knows that the voters would punish his party brutally, given half a chance. So, with a grand coalition and an electoral victory out, what alternative did he have? At the very least, he wanted another vote of confidence, securing a majority of at least 4 or 5 MPs in Parliament. When his whips told him that he is more likely to lose, rather than gain, backbench support in any new vote of confidence showdown, the referendum idea emerged as a possible solution: By offering MPs the referendum, they would now feel freer to grant Papandreou his vote of confidence on the basis that the MPs would no longer need to express the wrath of the electorate in Parliament since the people themselves will have an opportunity to do so directly!

If I am right, this Friday Mr Papandreou will get his vote of confidence in Parliament. And then what? How is he planning to overcome the referendum hurdle? His thinking is that, by then, Europe will have given him a few more crumbs by which to tell the Greek voters: “Here is the best deal I could extract from Europe, after having played a risky hand. Now, either you vote ‘yes’ or we are out of Europe altogether.”

In short, rather than an exercise in participatory democracy, the referendum is a shoddy, strategically ill-fated, morally corrupt and politically damaging ploy. Contrary to what is implied by the Greek PM’s minders, the referendum was never meant as a means of strengthening Mr Papandreou’s bargaining power over his European colleagues and the IMF. Had he cared to oppose the October Agreement, he ought to have done so in Brussels. No, the referendum is a means of extracting, first, a vote of confidence from his party’s battered MPs and, secondly, to impose upon the Greek people a hideous dilemma which identifies consent to the terrible October Agreement with a continued commitment to remaining in Europe. Rather than a gesture of granting Greeks a voice, this referendum is an attempt to gag the electorate.

My message to Mr Papandreou is simple:

You have erred consistently on all major issues at hand, from the moment you became PM and discovered the sorry state of the Greek public finances.

You sought out to deal with the debt crisis by means of loans, effectively proposing to deal with a bankruptcy problem as if it were a liquidity problem.

You never succeeded in arguing a case for a systemic solution to a systemic problem, accepting the calamitous notion that this is a Greek debt crisis from which the rest of Europe can be, somehow, ringfenced by toxic institutions like the EFSF.

You accepted ludicrous terms and conditions from our troika of lenders that no CEO, let alone a decent political leader, would have contemplated for more than a few seconds.

You continued to beg for such loans and to celebrate every time they were extended or slightly modified under the crushing pressure of circumstances.

You surrounded yourself with yes-men whose greatest utility to you was that they were… yes-men.

You repeatedly announced, to a public hungry for good news, that the crisis was ‘finally’ resolved (in May 2010, in March 2011, last July, indeed last week).

Now, in a desperate bid to cling on to power, you are attempting to gag your people by imposing on them a false choice between (a) an agreement which is bad for Europe as a whole and (b) staying in Europe.

Perhaps the most damaging of all aspects of your referendum idea is that it will solidify in the rest of Europe’s collective mind the false impression that the problem is Greece; causing our partners to remain in denial about the roots of our collective problems in the eurozone’s design.

Mr Papandreou, you have caused enough damage to the Greek nation; indeed, to Europe. It is time to dismantle your tent, pack it up, and steal gracefully into the night.

87 Comments

Agree completely; Papandreou has been a sham from the outset, but this hypocritical fiasco with a referendum really takes the biscuit!

You might also have mentioned that the Constitution stipulates that the Cabinet proposes any referendum to the Parliament, which has to pass it by majority and it is then formally announced by the President of Greece. It seems that Papandreou is trying to recast the position of prime minister (first among equals in a cabinet) as president: yet another shameful incident requiring his removal from power.

I am remembered to the time when I called publicly on Irelands leader, Brian Cowen, to step down. Needless to say, and I was not the only one calling for his resignation by any stretch of the imagination, he just sat it out as long as he could, and the results of his corrupt and dilettante nepotic politics, continued now by the so called opposition of his regency, they will be with us for decades.

Seems our leaders in Europe have a lot in common, doesn’t it? They sold us all out, and the people are left between skylla and charybdis, politicos and markets.

Mr Varoufakis, no matter how self-interested or idiot criminal is Papandreou, don’t you think that a referendum solely upon the October Agreement (and not on the remaining in Euro) is maybe the last chance for a Greek “No” since Papandreou himself will never offer it and neither his MPs nor the protests seem capable to throw him down? What are we afraid of? You have constantly argued that nobody will take the risk to throw us out of the Euro, hence according to you a referendum upon the October Agreement is a strong weapon against Merkel that might eventually force her to reconsider her proposals. At the same time it is a very good opportunity for the public opinion to be expressed, something that might eventually force Papandreou to resign (double benefit). All these will happen of course only if Merkozy do not make him have the referendum on the question: “In or out of the Euro”.

I agree with Manolis. If, as you’ve been arguing, Yanis, Greece will never be thrown out of the euro, then what do Greeks have to lose by voting ‘no’ in a referendum? Perhaps a ‘no’ will be the kick up the backside the euro elites need to make them change tack.

Basically , what really makes me angry and i agree with Mr Varoufakis to that IS that Papandrew used this public voting for national consumption , NOT as a means to bargain with Euro leaders .

The public voting is a tricky one . It depends on the question . It can be used as a weapon against Greek people . Maybe we need a public voting for the question first and then a second for the ruling ! 🙂

Did you see the look of Papandreou yesterday? Do you think he is ruling the country?

Dear Yiannis, your analysis is deeply political. Most of your interpretations of the chessboard movements by Mr Papandreou have only political criteria. But your analysis is falling short on analyzing the essence of the referendum which can only be comprehended if you take into consideration the peculiar nature of the Greek political scene. Mr Papandreou is the only reliable partner Europe can find in the Greek scene. Opposition leaders have proven to be heavily easy on worthless messages that only please the ears of their clientele, the Greek voters. As such Mr Papandreou is using one of his few resources to apply pressure to the EU leaders for a quick move on the finalization of the details of the agreement. Yes the referendum is targeting the EU officials to expedite the procedures and if possible get some bits and pieces of improvement. And yes… the referendum is also intended to impose responsibility to the Greek citizens and the PMs for their decisions. No more easy words, like “I like the EU but I do not like the measures imposed”. Weather we like it or not, we have to follow the orders of the troica.
You can judge the financial side of the measures and the agreements, but you should be more cautious when stepping in the area of politics to extend your judgements. Because for the political side of the story, none of us has all the knowledge needed. Therefore I think that we should think of the referendum, for what it is: commitment of all Greeks (politicians included), to the result of this procedure.
I think that most of your financial analysis has been accurate, fair and insightful. But it is always missing the political side of things. The crisis that you are describing is based on political mistakes, and requires brave political decisions to be resolved. I believe that political union of Europe is the only way to save what this continent has been building during the last 50 years. And it has to happen really fast. In this light, this referendum is in the right direction.
I am always happy to read your analysis, but be cautious when stepping in the battlefield of politics, especially in the peculiar Greek scene!
Thank you.

If i understand correctly you are saying that the doctrine imposed by IMF and EU and troika upon Greece and other countries is the right one?
What is the missing ingredient is the will of greek people to implement it, am i interpreting what you say right?

Have you seen the numbers of greek debt? Do you think that any remedy can work on this numbers? Do you think that 2020 prediction stands realistic? Predictions months ahead are proved in reality wrong .

Whether Europe leaders will find a viable solution for Europe and greek politicians insist on a realistic and viable greek solution OR we all going down big time . As Mr Varoufakis say , this is not a threat , IT IS REALITY . That’s why greek politicians must raise up to the challenge . If they can not . Step down !

The last two days , is really a mess trying to understand what is going on . Is there any hidden meaning behind actions , so on and so forth .

I found your article enlightening in some parts . Although , i still believe that , Mr Papandrew announcement of public vote was called upon by some other authority (US) . Initial reaction of Obama was positive (if i am not mistaken ) , as a means to signal danger to other euro members . Anyway . I can not support my argument . It’s more a belief .

One good out of this whole situation about public vote , is that people from other europe countries were stunned by the way their leaders responded against a public vote . Highlighting in this way , the “democratic” values upon this structure has been built .

On the other hand , Greece has gathered media fire power from all over the world . Which is unfair, given that Greece can do little to avert its own difficult situation , let alone the european one , let alone the global one .

Elections is the only way out as far as i am concerned . We are going to default , OK . At least have a representative , serving our own interests .

I can give you some insights . But whether it is in-depth or certain , that i can not guarantee ! Other people may have other opinions .

Personally , i believe that a huge part of the people in Greece are more than willing to vote a NEW party ! Yes left parties as you say , they ll take the share but it would be mostly votes out of disapproval to the big parties .
BUT there are personalities of wide acceptance that in case they decide to lead a new party , they would make a considerable difference . Such as Kazakis, Glezos , Kamenos and Varoufakis as well !!! and others .

As you see i am not talking about solutions they offer . To my belief , what is important is to convince the people that they are going to serve their needs for once ! I am sick of clever , brilliant , charismatic people serving the needs of plutocracy !

A catch . I don’t think that elections are probable in Greece at that time . The powers that be prefer ND ( right big party) but they won’t get the necessary majority to rule . That’s why they will try to avoid elections at this moment .
The most probable scenario is the creation of an alliance government . Which is going to be the death mark of Greece , as far as i am concerned 🙁

Long time lurker, first time poster. I have to say, thank you, Mr. Varoufakis, for being an oasis of sanity.

Now, we have to realize that we are aboard the Argentinian roller coaster. I believe that we are going to see a succession of dysfunctional governments..

As for change, well, a left coalition would be a solution. Mostly because of the… “mythology”. No matter the solution (exit the euro, a renegotiated agreement with the EU and IMF, etc), it is not going to work unless there is also a shift in the political and social awareness and identity of the Greek people. The left is the only one which can provide such a narrative.

Here is my take, why Papandreou is right about the referendum, and why I am going to vote YES!

A) The country is not functioning. There are daily strikes and nothing moves on
B) The opposition leaves no room for a coalition government. Their position is incoherent at best
C) The MPs feel have no mandate for the austerity measures.
D) Papandreou gets accused as a collaborator/traitor
E) 1 Million people passed by Syntagma calling for Direct Democracy
F) Media bash him on a daily basis, then they want the 26th oct decisions back ?

So the decision goes down to a referendum:
1. Goverment gets public mandate (or not)
2. The 26th october agreement continues as planned
3. The public gets their share of direct democracy.
4. For 2 years has tolerance in-party and from public

Elections are not a good idea
1. Parties have very blurred positions. No one knows what they really stand for
2. Just “chair rotation”
3. Are we chosing people or direction ?

So:
Why are we afraid of public opinion ?
Since when is democracy a such bad thing ?

and the last thing. Why I am voting YES
1. I know the numbers do not work-out. (in my calculations too). But I know step-by-step Europe will find the solutions. This is how EU works. It always has.
2. I want the EU shadow ministers overseeing the government. We need more eyes checking policies, numbers and transparency.
3. I do not trust Greek politicians.
4. I do not believe in Max-Keiser style solutions, although I enjoy watching him

Thanks for this well structured comment. Here is why I disagree, in brief (for the essence of my disagreement can be gleaned from my article anyway):
>1. I know the numbers do not work-out. (in my calculations too). But I know step-by-step Europe will find the solutions. This is how EU works. It always has.
This is, indeed, how the EU has sorted things out in the past. Through gradualism. Only this time, gradualism will be shashed against the wall of this euro crisis; a crisis that requires drastic re-designing of the euro architecture and where the evolution-through-fudging EU model fails.
>2. I want the EU shadow ministers overseeing the government. We need more eyes checking policies, numbers and transparency.
Here I agree with you. The October Agreement is not bad because of too much centralisation. It is bad for the opposite reason.
>3. I do not trust Greek politicians.
Nor do I. (Thus our emphasis, in our Modest Proposal, on the EIB.)
>4. I do not believe in Max-Keiser style solutions, although I enjoy watching him
Nor do I. If you watch my two interviews by him on yourtube, you will see that I took Max to task for his outrageous take on things which distracts us from serious proposals/policies.

2) EU shadow ministers overseeing ?!?
This is even more dangerous than having our greek politicians overseeing . EU has a very bad “transparency and checking policies ” reputation . To my understanding , it’s as if WE Greeks have not learned our lesson . What makes you think that germans inspectors will not fix the numbers in their favor? The policy the greek government was following was dictated by whom? Or was it the right solution and the greek implementation spoiled the remedy ? Having EU inspectors will only worsen things . Now we see German people as our Saviors ? This is madness !
P.s. i am not saying that things shouldn’t not change but have a little more faith on us , wouldn’t hurt .

3) This is a very bad generalization leading to totalitarian concepts . It’s our duty to vote better and improve our political criteria . Again , idealizing the european officials is naive to say the least . Read History for God’s sake . If greek people are incapable of taking their own destiny into their hands , then do you expect the germans to take it?

An ideal solution is not the one that makes perfect sense ! It has to consider public support as well . That’s the main reason that such solution will not come into fruition .
If someone has to pay the absurd taxes imposed by greek government and EU , and cares more about what other “industrious”, “hardworking”, “politically correct” europeans say than his own people that don’t have to pay and are about to lose their homes . Then that’s your problem !
If the solution does not include the majority of Greek people then it won’t include none of them . . .

Your analysis is to the point. Everyone else is trying to avoid the damn question with the excuse that it is a hideous dilemma.

It is the same dilemma the PM and the government is facing. He cannot bare the weight, he was not elected to bare such a weight. In the end he does not have the authorization by the people whether he realized it now or should have done earlier.

It’s time for everyone to face the dilemma be it the political parties or the people themselves.

If the referendum is avoided, we have just voted for YES. Eh for god’s shake then just vote for YES when it comes.

It seems that it is a play of sentiments. We want you to approve the 26th Oct deal, but also we want to retain the right to march and oppose everything that is included in it. And call you a traitor if it suits our explanations.

Basically I agree with Jason-I would have voted yes-I presume the EU knows the numbers do not work but they are more likely to find a solution in the end .An election-there is noone to vote for.A return to the drachma-sure would work in the end but how many citizens would be trampled by politicians et al in the scramble to the trough!

Provided Yanis that this is the whole picture.In the short term this trick may allow the govenrment to fall to give way to a coalition one which will take on the shared burden of a self-imposed catastrophy.Correct. However, there could be another more sinister prospect and more broad perspective.Consenting or being ignorant of the role he plays, the prime minister may be giving thus a helping hand -which in absence of a mechanism for forcing us out of the euro is needed – creating the context for the ideal suicide: We exit the euro by our own decision (because everone forces us to relate the final referendum question to this as it looks), the EU need to pay nothing, the speculators get their CDS, we are made a bad example for the others to obey (there must be always a black sheep or the white would have nothing to fear) and the country drifts geopolitcally until all of its national resources are distributed to all and sundry.Everybody gets a piece, job done.Resignation is not sufficient hor I am afraid fortchoming.They need to go as sinister or argentinian as this may sound…Because the dismantling of the national state and of the social cohesion, weak and faulted as this may have been. will not be allowed to start here, where the Polis was born.

hehehe, great…so all of a sudden mr. varoufakis is afraid of the spirits he has called…but the truth ever was that simple: if the greeks want to stay within the ez/eu, they have to say yes…otherwise its a no…

So Yanis- am I correct that you woudl ahve preferred GPap to balk last week in Brussels and extract more of a haircut ? Short of 100% of the non ECB, non IMF loans, what should he have held out for ? Maybe he coudl have gotten 60 or even 70% bt Merkozy and their banker backers were in no mood/position forthis, and now they have revealed that perhaps they are wlling even to court a coreciev default and attendant consequences. My only point here is that GPap may have seen this sentiment up clsoe and relized he had little more he could extract at this time from EU. maybe Merkozy are bluffing, but thsi is possibility Greece has ALREADY overplayed its hand, and German tolerance is at an end (now they may be cutting off their nose to spite themselves, but that is entirely plausible given their disdain for inflation and reluctance to let ECB (and indirectly Germany) become lender of last resort.

Seems to me we are truly at the end game now where te issues are cryctal clear- is Germany all in or do they boot Greece or (more likley as you have suggested) leave EU with other Holy Roman Empire northern EU nation states. I woudl not be surprised if Merkel is returning soon to Bundestag, and maybe even an election, to give her supprot – eitehr way its very dangerous for her politically to impose 100% haircut and economic contagion fallout OR tell greece to leave EU. There are no easy answers and great poilticla risks for all the politicians now; I can understand GPaps position in that sense.

Will it even get to a referendum ?I dont think he will survive the vote on friday.As for putting a question to the Greek Electorate of buying in or out of the eurozone if the politicians of europe dont get their act together it might not matter.Italy is under attack and france in a downgrade away from moodys or sp from losing AAA Status(which will effect the EFSF Immensely)

There is a connection.The threat of Greek chaos is a powerful argument for convincing -as it still is in the early stages-the Italian electorate (remember they have voted for Berlusconi so they are as bad as we are in terms of judgement so potentially succumbing to the same mass fooling tricks)

If the Euro-idiots want to avoid the Greek referendum, then they can withdraw last week’s nonsense and replace it with a Eurobond (or Modest Proposal) solution. This way when we get to vote there is nothing to vote on because it was withdrawn and replaced.

Otherwise, the referendum has to be a resounding NO.

This is a very rare opportunity for the Greek people to speak to the Euro leadership and should not be wasted. Voting yes in this referendum is the most anti-Greek thing one can do.

To me, the wisdom of the political tactic of announcing a referendum as a total surprise hinges on the question of whether Mr. Papandreou is a shrewd political leader or whether he is the overcharged, panicky and desperate “son of the father” as which many describe him. This I cannot judge but, still, I think it is the key question. Let’s assume for a moment that he is the shrewd, Thatcher-style political leader who does not scream “I want my money back!” but instead “I want more money!”

I simply cannot believe that the referendum was announced with the real intention to hold one, and I would still bet that there won’t be one. Heck, it doesn’t make sense because there is no upside to it. If the outcome is a “yes” (to whatever the question will be), there will still be close to 50% against it. And if it is “no”, it may by Greece’s fastest road to poverty and perhaps even anarchy.

Let’s be mindful what really happened here. For the first time since 2008, Greece is calling the shots. Perhaps in the worst of all possible ways but, nevertheless, Greece – as that party of the game which is going to be affected the most by its outcome – is calling the shots. All EU leaders who were interviewed today in Cannes said that they wanted “to hear from Mr. Papandreou what his intentions were”. So far, they had gotten used to telling Mr. Papandreou (and Greece) what his actions should be.

Let’s also be mindful of the consternation all over Central Europe that the October Plan may fall apart after all; that Greece may default after all; that Greece may even leave the Eurozone. Were those not the same people who were suspected, even in this blog, of ring-fencing Greece so that she could be driven into default and out of the Eurozone? If this were a poker game, I would get the strong feeling that one side just blinked.

Mr. Papandreou could make a credible case that he signed the October Agreement in good faith but that, in the time since then and back in Greece, reaction within his own party and protests from the streets had convinced him that something more had to be offered to the Greek people to safeguard against a breakdown of social order.

Why he had not consulted with his “bosses” in Paris/Berlin before? Well, just a procedural oversight. In hindsight a mistake, but please forgive me. Those things happen when one is under duress. Remember that Sarkozy/Merkel laughed about Berlusconi before TV cameras and they wouldn’t do that again, either.

Now that Mr. Papandreou obviously has everybody’s attention, it would be show-time for him. The time to explain that Greece remains 100% committed to bringing her household in order but to also explain that cutting government expenditures alone is not a workable solution for Greece (Mr. Papandreou could cite Mr. Reichenbach from the EU Task Force who said that Greece would return to growth in 2014 and not before). Mr. Papandreou could explain that parallel to the cutting of government expenses there have to be growth stimuli in the economy to create new jobs, new income, new income taxes and new corporate taxes. Otherwise, Greeks would not peacefully stay on board for another 24 or more months of continued pain.

The argument should be easy when it comes to money. With the 3-digit billion EUR numbers which the EU has gotten used to throwing around in connection with saving the banks who had lent to Greece, another few billion EUR for investment in growth projects in the Greek economy should not be such a big deal.

“It’s the economy, stupid!” – And that means it is growth which matters. If Mr. Papandreou is made out of Mrs. Thatcher’s mold, he will get what he wants and growth will return to Greece much sooner than 2014. If not, he will regret that he had not resigned when he could still have done so with some grace.

I have not taken a political stance to the crisis up to now, but I sense this is the time politics need to be employed in full and with sheer determination in order to salvage what is left of Greece – and Europe in that respect! In times like this, leaders need to emerge (sometimes out of nowhere) and take the lead to drive the “flock” away from the storm into the open, safe ground…It is one of the few times we Greeks will be given the chance – and take it – to consolidate into one fist and take charge of the problem with a risky solution that inflicts pain – yet rescues the patient from an otherwise terminal illness. Although I myself could not believe such a leader currently exists back home, I am confident -because I constantly pray – that one Does exist and one Will emerge to take the lead. What everyone else needs, though, is to put aside preconceptions, mistrust and blind attrition from the past and allow this leader to act driven by a sense of patriotism for Europe and not for Greece alone. Its not time for egos anymore…Greeks of the world UNITE and show Europe what it takes to lead by sacrifice! We have done it before… We will do it again. The choice is mine, yours, ours! Would you care to take the step?

What lead us here was the search and “discovery” of leaders.We need stuctures of real involvement which brings the best out of even average people.The organistion of the first days of the plateia Syntagmatos could not be anticipated even in paradeplatz Zurich: cleanliness, order, perfect logistics, provision and contigency plans for every emergency.Leaders as intellectuals and religious hierarchy are there as intermediaries between the first real power exercise, thye second logical concepts and the third between us and the “invisible’.I do not know abot that third category but enough of the first two.And I am an academic,..Not, however, in search of “assigning” my fate anymore to anyone who moves or talks more charismatically but to the rank and file who make the world move.There is something we need to construct:Intelligence of scale.Beats the “clever” politicians and the hedge fund people with the PhDs anytime.

What has happened is still unclear about this matter .
I can only comment that greek army is sustaining heavy financial
cuts and treacherous re-arrangements throughout Greece area .

All top military commanders chosen , are extremely unexperienced . Political authority surpassed all the experienced , field-proven candidates . It is commented in the media as an effort to avert bad implications , but my instinct tells me that exactly the opposite is true .

I am sorry about what i am going to say but , foreign media , german , english , french are heavily manipulated . Using Greece as a scape goat . People of northern Europe are the real victims here .

Before, calling upon Papandreou to resign, you should make a self-criticism.

You were among the NUMBER 1 advocates of forcing a solution through a bankruptcy threat, when as a “lofty idealist” you were believing and still stubbornly believe that an alternative agreement on the fundamentals could have being accepted by the Germans – French & Company. So once upon a time, apart from its merits, when such strategy is about to be forced and you saw the reactions, again like well trained ballerina you are trying to maneuver from what you were by the very first day suggesting. I.e forcing a solution through the threat of default. (PS: Do not mention the “timing” please show some respect)

You were among the NUMBER 1 advocates, who persistently failed to make clear two different things. The distinction between the necessity for Greece to cover it’s current cash flows from the the terms and performance of the Memorandum. You were only stressing the second, while ignoring the first by washing it on the grounds of solvency problems, pretending that an alternative contract was available through out a naive application of Rubinstein wage bargaining.

Third, you were the NUMBER 1 advocate for addressing the Solvency problems, and instead on proposing how to make the necessary structural transformations in the least painful way, you were bragging and promoting like a second rated mind something that you called “A modest proposal” which basically masks the roots of the Greek problems, although you were demanding to shift unilaterally the burden to the rest of Europe. This you call it an option for solution. Although, in order to be fair with you, in principle might be correct though as someone who has being left-wing coached, you fall on the same traditional logical inconsistency. Once you see, that a fixed condition has a bitter solution, you are trying to escape on the grounds of changing the condition, even if everybody knows that the condition upon which the solution is based cannot be challenged.

Fourth, i did not and ever heard from you talking about genuine trade offs, but rather you preferred to talk like a politician in disguise. (Actually this is the favorite job of almost every academic economist in Greece).

Everybody knows, that in terms of public finance, the chronic problem of Greece is that public expenditure is higher than tax revenues, and while the government cannot finance the gap in the markets, what are -in calendar time- the positive statements here ?.

1. Raise taxes.

2. Cut public spending.

3. Mix of 1 and 2

4. Borrow money from EU neighbors, given their offer on the fundamentals

5. Default.

(PS: Recessions in and out of the framework)

You never, as far as i can remember ever mentioned any of these truthful but objective trade offs, instead you rather preferred as another Lakis Lazopoulos describing the circumstance in the most convenient and general way, spoiled with vagueness, irony and pretense of knowledge.

To conclude, while indeed “the referendum is a shoddy, strategically ill-fated, morally corrupt and politically damaging ploy” from Papandreou’s side, the other side of the coin says that two years now almost everybody was pursuing an equally shoddy, strategically ill-fated, morally corrupt and politically damaging ploy by the parties involved in decision making processes, by the parties involved in economic debates, and in general by all the parties invoking another dreamland world. In that respect, the referendum is just the mean to confirm self-fulfilling prophecies. Is not the cause. Therefore, if someone want to commit a suicide is better to do it with “guts”. And of course i do not mean Papandreou but the nation as a whole. Accordingly, everybody will get what he deserves and everyone should bear his own responsibilities.

I think you have raised a host of very important points and I agree with you on the low threshold for logic. It is like a high jumper who says put the bar up to 2.5M and then he contemplates for a long time before running up and ducking under the bar at the last moment. There is consideration and concentration followed by a cop out at the penultimate challenge which in this case is how do you get a people to live within their means? To consume the fruits of what they honestly produce? I don’t hear anyone talking about the Chinese asset stripping their country and population to send money to the West so that communist apparatchiks can swan around with their Western equivalents. Shame on the EU for producing the begging bowl

Just a simple comment :
No one has a magic wand and no one asserts that there is a non-painful solution .
Do you really believe that hypothetically if such an NO was prepared industriously and was played well , would go answered by the EU leaders?
Do you think greek people can get out of this mess without a fight ?
What you miss is that the worst is yet to come in Greece . Wait a few months .
The dilemma for Greeks has always been between two very bad scenarios .

Put yourself together !

My biggest disappointment was that Papandreou used it for esoteric political purposes , which is outrageous .

Greek people must keep his/her spirits high and take responsibility to act and support each other !

The Greek PM has done many mistakes. More than many. He has consistently failed. His political capital has vanished. Trust has been eroded.

Even this action comes too late. On a tactical level is badly played. He could have asked/threatened for a referendum before consenting to the deal imposed by the Europeans.

He could have even, after all this has happened, refrain from visiting Cannes. Where he was treated like a rogue, a foreigner, an untouchable. Where he was left alone to announce outside the building what happened inside. Where the “leaders” of foreign countries announced before him, the date and the issue of the referendum of his country.

He could have waited for a visit after Friday. He didn’t.

But. His action shifted the lethargic tectonic plates of Greek politics. Everybody had to take an action and reveal his cards. The issues are far more straightforward now. ACTION needs to be taken.

The people opposed the referendum. The political majority also.

It will be much more difficult for them to march against the deal. It will be much more difficult to stay indifferent. Consent was reached even with the backwards way.

Papandreou has done what history was calling him for. An action of desperation and sacrifice, clumsily executed. The scapegoat will be dead in a few hours. The blood has been spilled. Time for the spirits to calm down. Time to confront the problems at hand with the cards at hand.

From my point of view, these are some challenging points Safis – in good will, I hope – that need to be answered back, to help the lay reader of this very constructive blog build a more critical approach.

If I were a Greek banker, I would be in the brink of hysteria as my property is going up in smoke, and my power is soon to be extinguished. However, if I could someway convince, arm-twist or whatever, the prime Minister to do something, anything, that would postpone my demise, I would do it, wouldn’t I? And maybe he would concede given the desperate political situation of the prime Minister himself.

For me there is only one explanation for our (the Greek) PM’s actions, culminating in the decision to go for a referendum on the October Agreement: the man is a complete idiot! He managed to make a perfectly democratic way of letting the people directly decide on important matters (a referendum) into a ridicule.

Firstly, he gave European leaders the opportunity to blame him (and more importantly Greece as a country) for all the tumult we are experiencing, since he had not informed anyone about his intentions before the agreement. Even though he insists that he had informed them, I cannot believe that all of his peers in Europe could agree so swiftly to lie about this. If, on the other hand, he had told them that he would bring to a referendum whatever agreement comes from the meetings, they would have had to respect this decision, even though they wouldn’t like it.

Secondly, he alienated himself from half of his ministers and his MPs, since he had not consulted them for such an important decision. It took them by surprise and now his party seems to be in a complete disarray and is emitting cacophony. You do not have to be a genius in order to see that when you are battling against very powerful enemies the least you can do is to ensure that your forces are solid and will stand their ground, otherwise you face certain defeat.

And thirdly, he continues to present a distorted and obscure picture to the Greek people and accuse everyone else for his inability to stand up to the situation: the ‘evil’ opposition, the speculators, the bankers, etc. The Greek people feel sorry for themselves with all the hardships they are facing today and they understand they will have to live with for a decade or even more; they have no sorry feelings left for him anymore. This is the moment of truth and the Greek people need to hear a clear story (a kind of “Modest Proposal” but more focused on Greece).

Now the only way out of this mess is to go to elections, although I fear that the outcome will not bring us closer to a solution. The New Democracy party, which the polls show to be ahead, is the party that ruled from 2004 to 2009 and played a major role in bringing the economy to the situation it finds itself today. They are now playing along with the public feelings but without presenting a clear picture themselves. On the other hand, the left wing parties seem to have gained power but they are too fragmented to be able to formulate a stable coalition.

He is classically caught between a rock and a hard place and I personally admire his ability to think on his feet. To enable a change in direction demands innovation; that in turn brings uncertainty. All he has done is create the potential for the people of Greece to become involved in the decision. That is surely the right thing to do; in any circumstances?

Charles Dallara, negotiating on behalf of the bankers, agreed to a 50 percent reduction in the amount of Greek government debt held by banks (a “haircut”), but the bankers are already trying to take a much smaller loss by monkeying with the fine print. By varying the details of interest rates and payback periods, bankers could end up losing a lot less than 50 percent—and Greece could end up getting a lot less than 50 percent debt relief.

Bottom line, Greece could wind up right back in the austerity trap, where the more the Greeks tighten their belts to pay debt, the more the economy collapses under them.

Bankers have already quietly unloaded a lot of Greek sovereign debt to hedge funds, and it’s not clear what kind of losses hedge funds are willing to take….

…..At some point, enough is enough, and if the terms turn out to be one more tightening of the noose, Greece could have less to lose by just defaulting. At least that is Papandreou’s not-so-tacit threat.”

What do you say about this and the rest of the arguments mentioned by Kuttner in this article, dear Yiannis?

If you watch my two interviews by him [Max Keiser] on yourtube, you will see that I took Max to task for his outrageous take on things which distracts us from serious proposals/policies.

Yes, Max can be quite rambunctious. I watched the interview you had with him last month. I had not heard of you before, and as I watched I was pleasantly surprised. You were not only self-composed but very articulate and intelligent. I watched the interview several times actually … and took notes 🙂

i new that Italy would come under attack i just didnt know it would be this soon,as of this morning the IMF IS offering Italy 44 BILLION IN LOANS,and also to start “monitering her finances”and the hits just keep on coming.

It seems to my that things are much worse dear Mr. Varoufakis. I still fail to see the reason why Mr. Papandreou has made the third choice, to announce a referendum, I can hardly disagree with you, but I think there are a few explanations I have in mind and I will try to share in brief:

1. His intention was to get a clear, strong mandate -in his own peculiar way- to enforce a bunch of new austerity measures. That would reduce the democratic deficit to a certain degree (highly improbable scenario).
2. He tried to set an ill-fated dilemma and threaten his own people: “That was the best I could do, take it or leave it”. (Where “take it” is a synonym to unquestionable acceptance of new measures – Quite Probable)
3. He tried to enforce discipline in his Parliamentary Group. A positive public vote would strengthen his position significantly within his Party. (This is not probable at all, given the fact that he has already announced that he will seek for a vote of confidence in the next couple of days).
4. He was going to use the referendum (or even the threat of a referendum) as a negotiation chip to convince the European leaders to renegotiate the terms of the agreement. (Probable)

I strongly believe that handling such an important issue likewise is an example of absolute lack of responsibility and makes crystal clear to me that the PM is a dangerous personality. My point is that Mr Papandreou had two scenarios in mind (2&4), but the European leaders didn’t accept to play his game….
The answer we received is humiliating! The Europeans told us in every detail on what subject (question), how, when and under what circumstances we are “allowed” to hold the referendum. “Ten different ways to reduce sovereignty” was a title I could use… Joke aside, this is a crucial crossroad and nothing can be taken for granted. And what I really consider to be most irritating is that if this referendum will be finally held Euro zone membership is at stake ! And we all know what really this means for the country…

Apparently, they are not giving us the 6th tranche now. I ‘ve been arguing all evening that this is a great opportunity for us Greeks to stop servicing our debt. What do you think, Yanis?

Also, I believe since things got so messy, exiting the Euro and even the EU for now might be a blessing in disguise for us Greeks. We are given the chance to start again from {almost} scratch on all levels.

To an outsider Greece appears to be chaotic. You must ask yourself how is order going to be restored? Who exactly is going to restore this order? Next question, where has the money gone? Who has consumed this borrowed money? Papandreou comes to power and discovers the corruption is much worse than he imagined, nothing surprising there I suppose, facilitated as it was by a raft of false accounting and SPV’s compliments of Goldman Sachs. In Ireland, there is a structural deficit because the government and unions got into bed together and agreed to rob the exchequer. Surreally they put in place a deal to cover the period 2010 out to 2014 to be paid for by bailout which protects themselves from any austerity. Don’t believe what you read we call it the Beal bocht in gaelic the “poor mouth” They continue to rob the exchequer now being subsidized with bailout money. Who robbed the government purse in Greece? I have heard you on the VB show a few weeks back telling us that not paying taxes in Greece was/is an Olympic sport. Interesting? So how does the government function and where does the money come from to pay the bills?

To summarize, gross under payment of taxes and no agreement for austerity. European “partners” screaming for their money back and Greeks screaming they are ready to burn poor George alive if he agrees to more austerity, all this against a background of constant riots being beamed around the world which must be killing tourism. I must say I feel sorry for Mr. Papandreou if only for the fact that he has exposed the EU for being a mono culture of fiscal fascism. They have really shown themselves up for what they are which is a clone of teutonic Bundesbank thinking. They came to asset strip Greece for their own calamatous mistakes in designing a grievously flawed Euro and then exporting the Deutche surplus back to Greece, Ireland, Italy etc. The EU crisis has happened because numerous countries in the EU want to spend more than what they earn and when the bill comes through the letterbox they (1) don’t want to change their habits and lifestyle as they prefer living in denial (2) want to blame someone else for creating the problem. That is, they want to spend the money and then blame the “idiots” for giving them too much money in the first place. The ‘you knew we were profligate’ but you ‘still gave us the money’.

As far as I can recall on the VB show you wanted the ECB to be given American federal reserve type powers, to bond print with money being poured back into the Piigs and Germany and France gaining by exports. Two questions? Firstly, why would the bonds be valuable and attractive? Secondly, where does the money come from to redeem these bonds? Is the answer to the first question Germany and the answer to the second question ‘we just print more bonds to redeem bonds ad infinitum! This is the American solution and they are now 14T in debt and their economy is on its knees and democracy is on its knees. Their system even requires presidential candidates to have a one trillion war chest to fight what are supposed to be democratic elections. Back to Greece, he has turned a no confidence vote into an election? I digress, back to membership of the EU. Maybe Greece and Ireland and Spain and Italy and Portugal are better off out of the EU. Yes, if we agreed the federal solution with common fiscal and monetary union and no democracy not even a pretense I can see that we could have a good party for about 5 years but then it would end in war.

I think you Greeks are falling into line with Merkozy. The ridicule of Greece is being staged so that you will ridicule Papandreou’s idea, and therefore approve the deal coming your way. That’s why there is so much invective.

There are two international factors in play right now beyond Greece.

1. The debt deal with banks will convert Greek debt into debt to be litigated in British courts in the event of a default.

2. The USA and China/Japan are showing up in Cannes, and Papandreou is acting like a lunatic. That means the G20 nations are going to give Merkozy a swift kick in the rear for punishing Greece and threatening the world economy.

I feel whether the idea for the referendum was insane or dangerous or idiotic, it has been working well as a game changer this week and has (so far) turned the tables of the conversation back to: What do the Greeks say? Even if all of Greece have very little new say, the rest of the world seems to be listening at this moment which is surely better than last week when it seemed like Greece was getting pummeled into a bad deal.

Did you all hear GPap starting to defend the “honor of the Greeks” a couple of times at the summit last week too? As a regular media watcher, I wondered what his “new words” were all about. In light of the events this week, I think it is clear the game was changing right then and there at the summit. What is NOT known is who else noticed, and who else endorsed this new strategy of GPap and who else also foresaw the referendum coming? It is also not clear if GPap is shrewd or desperate or both (probably the latter). But I really doubt he was the only one in on this.

The referendum is dead. Merkel and Sarkozi imposed Papandreou the dilema “Euro or Drachma”. This is what they seem to want right now. To get rid of Greece. And this will cause the referendum to fail cause either the PASOK MP’s will not accept it, or the Greek people will boycott it. It was doomed from the start and Papandreou now goes down with it, along with the country. Anger reigns the land as we speak and things can go really wild.

One more thing. Europe’s denial, by yanis definition, is becoming a self destructive neurosis. Sarkozi and Merkel, in their joy to humiliate Papandreou, seem to have forgotten staggering Italy.

Last. I would very much appreciate some kind of real info on Ireland. Many things are said and i would like a cool estimation. I know yanis is over his head right now so if there is anyone else to help here it would be much appreciated.

One important difference needs to be pointed out. The Greek Government is bankrupt and the Greek economy is ‘medieval’… not very successful on its own anyway. On the other hand: Italy’s Government is over-indebted, but the Italian economy is indeed very successful!. If you look at the northern regions, their standalone GDP is one of the highest in the world. So Italy can be saved, via structural reforms, key investments here and there and by getting rid of Berlusconi and his corrupt means (I know it’s a very simplistic description)…

a thriving economy is the government’s check-book…. in a similar way Spain and Ireland, after the huge construction bubble will ‘ONLY’ need to reshape their economiesl… but they will do so from a much better place than Greece… Effectively, none of these governments took charge of the direction of their economies (Yes! No free market-BS will) and because of this, they have been effectively using their government debt issuance as a ponzi-scheme for quite a while now, but Greece takes the cake (and buckets of ice-cream, deep-fried chocolate and whole lot more). If there is little substance backing the economy, the only way to pay for previous debt is to issue even more debt. The system collapses when it is unable to capture new debt.

Greece needs more than ‘just’ a stimulus package. It needs to build an ‘industrialized’ economy for the 21st Century (that takes usually more than a generation). Even though it worked remarkably well during the 1980’s and 90’s it has fallen way beyond Italy and Spain and Ireland in virtually every aspect…

As for Ireland…it’s only good for them that Greece remains in the eye of the storm. They went bankrupt the minute the government decided unilaterally (without any EU-wide consensus) to secure 100% of the country’s bank deposits, even though the banks had had no capital whatsoever (after their losses in the construction/housing-bubble)… Soon after the announcement, many English moved their savings to Ireland (after their experience with Iceland) and the rest is history… The Irish government has already asked for its ‘Hair-cut’… so let’s see…

Yanis
Thank you for clarifying things for us. I feel saddened to think that Papandreou had people like you, and if I’m not mistaken, Paul Krugman, giving him sound advice. My query is the following: Why is it that political leaders (I’m sure GAP is not the only one!) hire experts for advice which is never taken, or at best, partially taken?

Do you mind telling us why a dedicated hard liner, like Mr. Samaras will calm things down?

Samaras coming to power would be the equivalent of unleashing hell onto the euroland.

I happen to think that we are at an undeclared war right now, and Samaras might be the right person to lead it (as he has made it abundantly clear that he is NOT bound by any memorandum agreements so far).

But why you? I thought of you as a pacifist. Since when did you acquire a taste for bloody war?

are you so certain that Samaras will be able to form a stable goverment even if he wins the elections? The polls so far show that it is not very probable. And even if he does, I would not bet my money on his waging war against the “troikans”. Most probably he will capitulate without a fight.

I think that Greece is entering a period of political instability that will last for a long time, unless something spectacular happens…

If it’s possible that Mr. Papandreou may still win a vote of confidence after his colossal blunder, then surely he could have gotten it without the call for a referendum, no? The MPs in his party protested too much before every vote, yet solidly backed every measure when the time came to vote. Now, after a call for a referendum, they have found their previously misplaced conscience, for reasons I do not understand.

Could Greece have really had a say in the Brussels deal? What cards does it have? I believe the only card is to threaten to default and leave the euro. If the next Prime Minister is unwilling to play that card, how could he get a substantially better deal? Based on my limited understanding, it seems to me that the EU is hellbent on imposing austerity.

In conclusion, I am completely baffled by Mr. Papandreou’s call for a referendum and baffled by the response by all the MPs and even by the Greek people, some of whom have been saying that they felt themselves under (economic) occupation.

with all due respect, I have to say that GAP has done the wisest thing he could do before he steps down. He did loads of mistakes, the biggest one of them being, that he trusted his party or his government or the political system in Greece that they would also like to change things. They don’t and he failed. And trying to compromise between them and the generally accepted incompetent Europe, he made the rest of his countrymen suffer. So he is stepping down after all. But he has forced everybody else in Greece to realise that we have nothing to negotiate with and everybody else, Antonakis mainly, will have to accept their responsibilities. Good luck to us all…

I too thought it was a good move, until the Euro-masters turned it into a euro referendum which is beyond idiotic.

The current Lisbon Treaty does not allow for ejecting a eurozone member. The only way to do that is to have the treaty amended. The chances of Spain. Italy, Portugal, Ireland, Greece et al signing such amendment is below subzero.

I still think it was a good idea to propose the referendum, even though it is on hold!

Yes the October-deal is far from perfect. But short-term solutions are needed in order to gain oxygen to work on long-term/structural solutions. It will take time, but Europe will survive. I do think that it was not the best approach to call the opposition’s bluff (in his party and outside). He should have demanded the opposition to stop whining and after their intransigence, then call for a referendum. It came across as a unilateral decision, as if no-one had forced him to do so…

WHY the referendum matters:
The Greek people needed a ‘Scandinavian benefits system’ after all that they had been trough: having survived the German-Italian occupation during WWII, a Civil War, Military Junta, the end of the monarchy, Dictatorship, Turkish invasion and secession of Cyprus, as well as years of war between the leftist ‘communists’ vs. rightist ‘conservatives’ was surely no easy trick.

The only reason they could afford their ‘Scandinavian benefits system’ was the successful industrialization process and sustained economic growth after joining the European Union. People don’t like to pay taxes, because of corruption; yet they keep electing corrupt politicians, because they provide people with Scandinavian benefits and so on…. so I guess it’s a chicken/egg dilema. Papandreous’ proposal to the Greek people was simple: let’s all get on the same boat! Yet many didn’t want the responsibility in their hands… for those decisions they have their elected politicians, which at the same time are unwilling/unable to make any decisions, because they think of their own popularity… WHICH CAME FIRST… THE CHICKEN OR THE EGG?

Greece need the welfare net but the money is not there to provide that net and you cannot live on “bailout” because bailout is like soup to which nothing has been added except bay leaves and onions. The Irish use their bailout for welfare, over paying public servants and recapitalising banks that had gaping holes shot through them by NAMA and equally due to lack of bondholder participation. Ireland, in my humble opinion, and I live there is one of the most corrupt countries in the EU. The decision to guarantee 440bn made on 29th of September 2008 was made in a smoke filled room by Irish gamblers who bought the lie that Irelands banks had a liquidity problem when they were in fact insolvent. Just as the European banks tried to hide behind the phony stress tests.

Greece are going to have this election call it what you will. That election is a vote on whether to stay or leave the EU. The majority 70% do not want to leave. Maybe they recognise that if they left the state would quickly collapse sliding into civil war. In any event, the country would be totally ungovernable even worse than now! Greeks know this and will say “Yes!” The result will deliver the next tranche of the program but Greece still lacks the economic muscle to claw its way out of the prison that its EU “partners” have designed for it. When Argentina collapsed it did so because of the dollar peg, and a weak economy, but one of the main reasons for the collapse was, the rich moved their money out of the country. This is happening in Greece now for over 2 years. Greece is still caught between a rock and a hard place, this “yes” buys time but sooner or later it will be forced into an unstructured default.

Unless of course Yanis Varoufakis’s ‘modest proposal’ is acceptable to Sarkozy and Merkel but I think Germany and France will apologise exit the Euro so as to be in control of its their own economies. At the end of the day, ECB’s bonds would only be strong if there was unity. There is no unity and there is no democracy. Maybe the unity can be forged and tempered out of the hot fires we are now in but that remains to be seen and certainly there will be no democracy.

1. Greece’s economy is far from Medieval. It may not be heavily industrialised or high- tech oriented but it is developed as any in the eurozone. It focuses mainly on banking and shipping (a leading figure there) with a small but active swarm of modern indrustries. So yes, it needs restructuring but i disagree on the industralisation issue if this means heavy industry. It would be far better to focus on tourism or/and energy. The main problem of Greek economy has been Greek politics.
2. Italy’s economy is surely on a different scale from Greece’s in so many levels. But beurocracy reigns supreme, corruption has a steady foothold everywhere and the private (non public) debt is also high. It is a great economy by any standards but it’s very size means that Italy’s problems don’t have to be as acute as Greece’s to be extremely hazardous. And this very size also means that structural changes may be more difficult to take effect. – The moment i wrote this i was informed that IMF stepped in.
3. As for Ireland, i know the history. What i would like to know is what is happening now. Some say that it is recovering and others say that rations in schools where cut in half because of the austerity measures. Well, has the austerity really worked?

I very much regret that the referendum is not going ahead. I believe that if Greece had finally voted “no” then at least this ridiculous situation would come to an end (though not a pretty one).
Greece could have properly defaulted (honoring less than 50% of its outstanding government debt – maybe 30% or so) and at the same time could have left the EURO. Then, Greece would be the master of its own fate again and this situation that leads to bitterness between the European people would have ended.
Austerity would have to be implemented immediately (because the markets would not lend any money to Greece after the default) but then, it would be up to Greece to sort this out and no longer the EU, evil Germany or the IMF would be in the role of the evil one telling the poor Greek what to do.
Now, with Greece agreeing to the October deal, this never ending story will just continue and the whole of Europe and the whole world will get more of the same drama with Greece. I so had enough of this.
So Greece will always – finally – accept austerity measures imposed by Troika. But only after painfully slow negotiations. So the EU’s donor countries will continue to pour money in this hole and in the end everybody (surprise!) will realize that Greece will default and all the money is gone.
I seriously doubt that Greece is willing or able to accept the reality and do what it takes to get itself out of this mess. So we (the donor countries) are just throwing good money after bad.
Why not end this disaster now, let them default, leave Eurozone and then we all (including the Greek) get on with our lives?

Martin , what i think you are missing here is that Greece is not the problem . It’s the tip of the iceberg . Suppose Greece is leaving the Euro , the euro crisis would end?
Look at the spreads of other Euro countries . In fact a Greece defaulting would accelerate the fall of Eurozone .

The only difference between eurozone countries is the time period they can sustain themselves in such a hostile financial environment . Put it in other words , they have different decay time . And what’s to blame for this situation is euro itself . Its design principles . Euro for God’s sake is not a common currency !!!
When banks go bust , ECB lends them with 1,5 percent . When a country goes bust , ECB lends other countries banks at 1,5 rate to lend the Greece with 5 ! Is ECB the central bank of Europe ? It is the central bank of european banks for God’s sake .
Mr Varoufakis can explain better than me , why Euro has no mechanism to absorb shocks . Buying bonds from Spain and England and selling them is a totally different story ! And this fact plays a huge role at what rate a country is borrowing . A slight rumor is enough to destabilize the bond market in eurozone countries and make the sovereign debt sky rocketing . What is essentially what’s going on right now !

I think you are a victim of the propaganda of your Country . You are tired of hearing Greeks are doing this or that .You ultimately say , let them out of the Eurozone and you think everything would be better .

The mistake you ‘re doing is : Greeks are the central point of discussion but not the centre of this crisis or the cause of this crisis . And as splendid engineers and problem solvers that you are : you can’t really find the solution until you pose the right question , do you?

Dear Ilias
I agree with you in that Greece is not the only problem. Sure, if Greece left the Eurozone that would not mean the general crisis was over.
Portugal also looks wobbly. But at least there, the debt mountain is not so huge. So if they manage to reduce their deficit NOW then there is a chance (together with some structural reforms to boost the economy withouth taking on more debt).
Spain I am not sure about. It’s more a gut feeling but I believe they should be able to make it. The budget needs to come down (overall debt is not high yet) and somehow, they have to figure out how to bring unemployment down.
Italy is the main danger: Too big to be saved – but it has the potential (just!) to stabilize. If they do the right thing right now.
With Greece out of the Eurozone, things would be easier for everyone, including the Greeks themselves. I hope I am wrong and somehow things will work out fro Greece in the Eurozone. But I really don’t see how.
There does not seem to be much awareness of the ultimate problems and instead bitterness about “inadequate help” from the Eurozone partners. But the hole Greece dug itself in seems huge to me I guess defaulting and leaving Eurozon ewould be best.

From a Game Theory perspective, someone could argue that the Prime Minister read the decision tree (which would succesfully end up underlying the truth that the debt problem defined in the single space of Greece since May 2010 was rather a European one) as an Arab…

This is why I was surprised to hear Yani say it. Because every politician in Greece right now is lusting for a new government.

Which is precisely why such opportunity will not be given to them. Because they are not cognizant of what has just happened to them.

Last week Greece was declared officially bankrupt, courtesy of the German-inspired 50% PSI.

So at the moment, Greek politicians are rushing to approve a package which will sure consign them to official bankruptcy, while claiming all along that the reason for their urgency is to avoid the very bankruptcy which has already occured.

It is truly strange and it makes you wonder whether modern politicians have any elementary understanding of economic/financial principles.

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